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World
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3 March 2005 |
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(05-0884) |
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UNITED STATES – SUBSIDIES ON UPLAND COTTON
AB-2004-5
For the reasons set out in this Report, the Appellate Body:
as regards procedural matters:
in relation to production flexibility contract payments and market loss assistance payments:
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upholds the Panel's finding, in
paragraphs 7.118, 7.122, 7.128, and 7.194(ii) of the Panel Report, that
Articles 4.2 and 6.2 of the DSU do not exclude expired measures from the
potential scope of consultations or a request for establishment of a panel and,
therefore, that production flexibility contract payments and market loss
assistance payments fell within the Panel's terms of reference; and
- finds that the Panel set out the findings of fact, the applicability of relevant provisions, and the basic rationale behind this finding, as required by Article 12.7 of the DSU; and
in relation to export credit guarantee programs:
- upholds the Panel's ruling, in paragraph 7.69 of the Panel Report, that "export credit guarantees to facilitate the export of United States upland cotton, and other eligible agricultural commodities ... are within its terms of reference"; and
- upholds the Panel's ruling, in paragraph 7.103 of the Panel Report, that "Brazil provided a statement of available evidence with respect to export credit guarantee measures relating to upland cotton and eligible United States agricultural products other than upland cotton, as required by Article 4.2 of the SCM Agreement";
as regards the application of Article 13 of the Agreement on Agriculture to this dispute:
in relation to Article 13(a)(ii):
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upholds
the Panel's finding, in paragraphs 7.388, 7.413, 7.414, and 8.1(b) of the Panel
Report, that production flexibility contract payments and direct payments are
not green box measures that
fully conform to paragraph 6(b) of Annex 2 of the Agreement on Agriculture; and, therefore, are not exempt from
actions under Article XVI of GATT 1994 and Part III of the SCM Agreement by virtue of Article 13(a)(ii) of the Agreement on Agriculture; and
- declines to rule on Brazil's conditional request that the Appellate Body find that the updating of base acres for direct payments under the FSRI Act of 2002 means that direct payments are not green box measures that fully conform to paragraph 6(a) of Annex 2 of the Agreement on Agriculture; and, therefore, are not exempt from actions under Article XVI of GATT 1994 and Part III of the SCM Agreement by virtue of Article 13(a)(ii) of the Agreement on Agriculture; and
in relation to Article 13(b)(ii):
- modifies the Panel's interpretation, set out in paragraph 7.494 of the Panel Report, of the phrase "support to a specific commodity" in Article 13(b)(ii) of the Agreement on Agriculture; but upholds the Panel's finding, in paragraphs 7.518 and 7.520 of the Panel Report, that Step 2 payments to domestic users, marketing loan program payments, production flexibility contract payments, market loss assistance payments, direct payments, counter-cyclical payments, crop insurance payments, and cottonseed payments (the "challenged domestic support measures") granted "support to a specific commodity", namely, upland cotton;
- declines to rule on the United States' appeal that only the price gap methodology described in paragraph 10 of Annex 3 of the Agreement on Agriculture may be used to measure the value of marketing loan program payments and deficiency payments for the purposes of the comparison required by Article 13(b)(ii) of the Agreement on Agriculture; and
- upholds the Panel's finding, in paragraphs 7.608 and 8.1(c) of the Panel Report, that the "challenged domestic support measures" granted, in the years 1999, 2000, 2001 and 2002, support to a specific commodity, namely, upland cotton, in excess of that decided during the 1992 marketing year; and, therefore, that these measures are not exempt from actions based on Articles 5 and 6 of the SCM Agreement and Article XVI:1 of the GATT 1994 by virtue of Article 13(b)(ii) of the Agreement on Agriculture;
as regards serious prejudice:
in relation to Article 6.3(c) of the SCM Agreement:
- upholds the Panel's finding, in paragraphs 7.1416 and 8.1(g)(i) of the Panel Report, that the effect of the marketing loan program payments, Step 2 payments, market loss assistance payments, and counter-cyclical payments (the "price-contingent subsidies") is significant price suppression within the meaning of Article 6.3(c) of the SCM Agreement, by in turn upholding the Panel's findings:
(A) regarding
the "market" and "price" in assessing whether "the
effect of the subsidy is ... significant price suppression ... in the same
market" within the meaning of Article 6.3(c) of the SCM
Agreement:
- in
paragraphs 7.1238-7.1240 of the Panel Report, that the "same market"
may be a "world market";
- in
paragraph 7.1247 of the Panel Report, that a "world market" for
upland cotton exists; and
- in
paragraph 7.1274 of the Panel Report, that "the A-Index can be taken to
reflect a world price in the world market for upland cotton"; and
(B) regarding
the "effect" of the price-contingent subsidies under
Article 6.3(c) of the SCM
Agreement:
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in paragraphs 7.1312 and 7.1333 of the
Panel Report, that "significant price suppression" occurred within
the meaning of Article 6.3(c);
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in paragraphs 7.1355 and 7.1363 of the
Panel Report, that "a causal link exists" between the
price-contingent subsidies and the significant price suppression found by the
Panel under Article 6.3(c) and that this link is not attenuated by other
factors raised by the United States;
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in
paragraphs 7.1173, 7.1186, and 7.1226 of the Panel Report, that it was not
required to quantify precisely the benefit conferred on upland cotton by the
price-contingent subsidies and, consequently, not identifying the precise
amount of counter-cyclical payments and market loss assistance payments that
benefited upland cotton; and
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in paragraph 7.1416 of the Panel
Report, that the
effect of the price-contingent subsidies for marketing years 1999 to 2002
"is significant price suppression ... in the period MY
1999-2002"; and
-
finds
that the Panel, as required by Article 12.7 of the DSU, set out the findings of
fact, the applicability of relevant provisions, and the basic rationale behind
its finding, in paragraphs 7.1416 and 8.1(g)(i) of the Panel Report, that
the effect of the price-contingent subsidies is significant price suppression
within the meaning of Article 6.3(c) of the SCM Agreement; and
in relation to Article 6.3(d) of the SCM Agreement:
- finds it unnecessary, for the purposes of resolving this dispute, to rule on the interpretation of the phrase "world market share" in Article 6.3(d) of the SCM Agreement, and neither upholds nor reverses the Panel's findings in this regard; and
- declines to rule on Brazil's conditional request for the Appellate Body to find that the effect of the price-contingent subsidies is an increase in the United States' world market share in upland cotton within the meaning of Article 6.3(d) of the SCM Agreement;
as regards user marketing (Step 2) payments:
upholds the Panel's findings, in paragraphs 7.1088, 7.1097-7.1098, and 8.1(f) of the Panel Report, that Step 2 payments to domestic users of United States upland cotton, under Section 1207(a) of the FSRI Act of 2002, are subsidies contingent on the use of domestic over imported goods that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement; and
upholds the Panel's findings, in paragraphs 7.748-7.749, 7.760-7.761, and 8.1(e) of the Panel Report, that Step 2 payments to exporters of United States upland cotton, pursuant to Section 1207(a) of the FSRI Act of 2002, are subsidies contingent upon export performance within the meaning of Article 9.1(a) of the Agreement on Agriculture that are inconsistent with Articles 3.3 and 8 of that Agreement and Articles 3.1(a) and 3.2 of the SCM Agreement;
as regards export credit guarantee programs:
upholds the Panel's finding, in paragraphs 7.901, 7.911, and 7.932 of the Panel Report, that Article 10.2 of the Agreement on Agriculture does not exempt export credit guarantees from the export subsidy disciplines in Article 10.1 of that Agreement[1];
finds that the Panel did not improperly apply the burden of proof in finding that the United States' export credit guarantee programs are prohibited export subsidies under Article 3.1(a) of the SCM Agreement and are consequently inconsistent with Article 3.2 of that Agreement;
declines to find that the Panel erred by failing to make the necessary findings of fact in assessing whether the export credit guarantee programs are provided at premium rates that are inadequate to cover long-term operating costs and losses within the meaning of item (j) of the Illustrative List of Export Subsidies annexed to the SCM Agreement; and, consequently,
upholds the Panel's finding, in paragraph 7.869 of the Panel Report, that "the United States export credit guarantee programmes at issue—GSM 102, GSM 103 and SCGP—constitute a per se export subsidy within the meaning of item (j) of the Illustrative List of Export Subsidies in Annex I of the SCM Agreement", and upholds the Panel's findings, in paragraphs 7.947 and 7.948 of the Panel Report, that these export credit guarantee programs are export subsidies for purposes of Article 3.1(a) of the SCM Agreement and are inconsistent with Articles 3.1(a) and 3.2 of that Agreement; and
finds that the Panel did not err in exercising judicial economy in respect of Brazil's allegation that the United States' export credit guarantee programs are prohibited export subsidies, under Article 3.1(a) of the SCM Agreement, because they confer a "benefit" within the meaning of Article 1.1 of that Agreement;
as regards circumvention of export subsidy commitments:
reverses the Panel's finding, in paragraph 7.881 of the Panel Report, that Brazil did not establish actual circumvention in respect of poultry meat and pig meat; finds, however, that there are insufficient uncontested facts in the record to complete the legal analysis to determine whether the United States' export credit guarantees to poultry meat and pig meat have been applied in a manner that "results in" circumvention of the United States' export subsidy commitments, within the meaning of Article 10.1 of the Agreement on Agriculture;
modifies the Panel's interpretation, in paragraphs 7.882-7.883 and 7.896 of the Panel Report, of the phrase "threatens to lead to .... circumvention" in Article 10.1 of the Agreement on Agriculture to the extent that the Panel's interpretation requires "an unconditional legal entitlement" to receive the relevant export subsidies as a condition for a finding of threat of circumvention, but upholds, for different reasons, the Panel's finding, in paragraph 7.896 of the Panel Report, that Brazil has not established that "the export credit guarantee programmes at issue are generally applied to scheduled agricultural products other than rice and other unscheduled agricultural products (not supported under the programmes) in a manner which threatens to lead to circumvention of United States export subsidy commitments within the meaning of Article 10.1 of the Agreement on Agriculture"; and
finds that the Panel did not err in confining its examination of Brazil's threat of circumvention claim to scheduled products other than rice and unscheduled products not supported under the United States' export credit guarantee programs;
as regards the ETI Act of 2000, declines Brazil's request that the Appellate Body reverse the Panel's conclusion that Brazil did not make a prima facie case that the ETI Act of 2000 is inconsistent with the United States' WTO obligations; and
as regards Article XVI:3 of the GATT 1994:
finds it unnecessary, for the purposes of resolving this dispute, to rule on the interpretation of the phrase "any form of subsidy which operates to increase the export" in Article XVI:3 of the GATT 1994, and neither upholds nor reverses the Panel's findings in this regard; and
declines to rule on Brazil's conditional request for the Appellate Body to find that the price-contingent subsidies cause the United States to have "more than an equitable share of world export trade" in upland cotton, in violation of the second sentence of Article XVI:3 of the GATT 1994.
The
Appellate Body recommends that the Dispute Settlement Body request the
United States to bring its measures, found in this Report and in the Panel
Report as modified by this Report to be inconsistent with the Agreement on Agriculture and the SCM
Agreement, into conformity with its obligations under those Agreements.
Signed in the original in Geneva
this 10th day of February 2005 by:
[1]See Separate Opinion, supra, paras. Error! Reference source not found.-Error! Reference source not found..